Perhaps it is the country's size, ancient civilisation and tumultuous modern history, or perhaps the result of its spectacular economic growth since Deng Xiaoping unleashed market-led economic reform 30 years ago. Whatever the reason, commentary on China seems all too easily trapped in hyperbole.

Either the last major state on earth ruled by a Communist party is seen as a nascent giant dragon about to take over the planet or it is a weak pretender that lacks the political, economical and social resilience to live up to its pretensions. In the first case, this will be China's century. In the second, the People's Republic is an emperor without clothes whose nakedness has been shown up by slumping economic performance and a rising tide of internal protest, fulfilling all the criticisms of its one-party political system and the attendant faultlines.

On the one hand is the image of a vast country with 1.3bn people moving inexorably to dominate the world now that it has freed itself from the shackles of the late imperial-Republican-Maoist century. For those who would welcome the end of the post-1945 global balance and the humbling of America, this is a most seductive prospect.

On the other hand is the picture of a vast country with 1.3bn people going out of control, rent by internal strife and social disorder in a re-run of the enormous grassroots revolts of the mid-19th century or the civil war between the Nationalists and Communists. For those who like a good story and those who think that a repressive one-party state is not morally entitled to China's recent record of material success, this is an irresistible narrative to project on to the back of the current economic downturn.

This week, the bulls were represented by the announcement that the growth of China's GDP in 2007 was being officially increased from 11.9% to 13%, taking the mainland ahead of Germany to become the world's third biggest national economy after the US and Japan. Even in the midst of predictions of doom for the first half of this year, prime minister Wen Jiabao was quoted on Monday as saying that the fiscal and monetary stimulus programme set in motion in November was already having an effect, and looking forward to China being the first big country to emerge from the crisis. On the other hand, some leading analysts have cut their predictions of growth this year to 5% as economic date shows continuing decline. The prominent exiled dissident, Wei Jingsheng warned in the Times of a tidal wave of discontent and the Guardian's Simon Tisdall, commenting on the current crackdown on political reform, saw the leadership in Beijing facing "a painful reckoning with China's over-pressured and under-represented masses".

In this year stuffed with sensitive anniversaries, there is no doubting the scale of the challenge facing China after its go-go growth since 2002. The tensions have been building up for a long time. The process of rebalancing the economy to lessen its dependence on low-cost exports and boost consumption was always going to be difficult. The lack of a real welfare system and the growing wealth disparities are bound to fuel discontent. The one-party system and the lack of the rule of law mean safety valves are missing. Now the impact of the global crisis on the economy and the effect on tens of millions of migrant workers thrown out of jobs make it easy to foresee doom and gloom for the mainland. (Taiwan is even worse hit in its vital export sector.)

But, as the Beijing ducks come home to roost with every prospect of a couple of bad quarters ahead and an autumn upturn still over the horizon, China ought to be seen in perspective. Let me advance 10 contrarian points; there are more, but such lists should not go on for too long.

1) Yes, growth dropped in the later months of 2008. But the PRC's economy is still expanding.

2) Yes, exports are falling. But imports are dropping even faster in price and volume, so there have been record trade surpluses this autumn and winter to produce an all-time high of $295bn for the year

3) Yes, China is suffering from the world crisis and there have been outflows of funds. But the PRC's foreign exchange reserves still jumped by $61bn in December to $1.95tn.

4) Yes, people are worried, and savings have risen. But the last retail sales figures showed a 20% rise year-on-year.

5) Yes, the profits at the 140 biggest state-owned enterprises fell by 26% between 2007 and 2008. But their combined revenue grew by 20% in the first 11 months of last year.

6) Yes, unemployment is at least double the official 4.5% rate. But wages have been rising fast.

7) Yes, a lot of factories making things like shoes and T-shirts and plastic goods have closed down in the manufacturing hubs of Guangdong and Zhejiang. But many of these plants were rooted in the 1980s and needed to go out of business as China moved up the industrial ladder and implemented new labour legislation that shook their sweatshop model.

8) Yes, the increase in the demand for energy, usually a good indicator of economic activity, has slowed down dramatically. But more stringent times may push enterprises into eliminating their wasteful use of inputs as part of a broader move towards the greater efficiencies the country needs, particularly if electricity price controls are lifted.

9) Yes, China is pump-priming with its programme of subsidies and new infrastructure spending (say 1tn yuan (£100bn)). But which government is not doing the same? The latest figures show that banks are actually shelling out the money to companies as annual loan growth rose to 18.8% in December, and the broad M2 money supply rose by 17.8%, which is a huge increase given the big fall in inflation in the second half of 2008.

10) Yes, there is discontent among workers who have been laid off and may not return to urban jobs after the lunar New Year holiday and yes, there is already rural over-employment and many returning migrants lack farming skills. But it is interesting to note that reports of grassroots protests repeatedly cite just a couple of outbreaks of violence in Guangdong in which the authorities moved swiftly to placate the demonstrators.

This is not to underestimate the difficulties now hitting the People's Republic, nor the prospect that, even if the present policies do bear out the prime minister's optimism, there will be another downturn around the end of the year lasting into 2010. The current indicators are, for the most part, pointing downwards. The economy and society are much more complex than at the time of the last big decline, at the end of the 1990s, and the central government's ability to turn the ship round is that much more debatable.

China's progress since 1978 has been a volatile process in which, despite its insistence on one-party rule, the leadership has had to cede much of the control imposed by Mao Zedong. But for the party leader, Hu Jintao, and his colleagues, the stakes are even higher than for leaders in other countries. The Communist party and the regime it runs draw most of their legitimacy from economic growth and social stability. That means they have to throw everything they have got at the current economic problem. A catastrophic slump would not only endanger their positions but would also bring into question the form of regime that has ruled since 1978.

China's prospects need to be seen in that wider context. The country may have more going for it than the present doomsayers suggest, but it is facing a survival test of a kind not known in the west. The stakes are so high – and the importance of China to the world so great – that they should not be subject to simplification through a Manichaean lens.